The Financial Express

Journey from developing background to developed country

Journey from developing background to developed country

To become a 'developed' country from a 'developing' background involves a huge jump. Is Bangladesh capable economically to make that leap? A lot will, of course, depend upon how high the export diversity. Yet how sophisticated its exports also matters, and increasingly so. Whereas the former informs us of the versatility of the economy, the latter shifts attention to qualitative factors. 'Productive knowledge' is the term used by a Harvard University Team, called Growth Lab, to capture those factors. Shifting from the factory to the laboratory is part and parcel of this transformation, and perhaps the Rubicon of Bangladesh's fate.

Bangladesh's climb up the 'less developed country' ladder into 'developing' made full use of the country's most abundantly available resource: human labour. That it was a low-wage start did not matter for the worker, so long there was a wage; and that it catalysed women so remarkably ended up being the bonus behind keeping our ready-made garment (RMG) industry so viable for so long, even as we enter the third decade of the 21st century.

Yet, that also tells us the key weakness: whereas other RMG competitors diversified, Bangladesh did not; and since that diversification took them out of low-waged industries into high-skill outlets, their 'productive knowledge' was boosted in the way ours is not. They moved up the 'economic complexity' list in a way we have not. Starting that journey serves us better.

Developed by the same Harvard University Growth Lab, the 'productive knowledge' measurement exposes the contextual nuances more than it does the measurement indicators. For example, we can deduce why a farm- or mineral-dependent exporting country will not show too much 'economic complexity'; while another, Switzerland, without being one of the world's top economies, rapidly climbed towards the top. This 'productivity knowledge' need not be imparted exclusively by universities or technical or professional schools: they can be, but in this on-the-job learning Fourth Industrial Revolution age, can more easily be ignored. Swiss universities, for example have been largely crowded out of the top-ranked listings, and there are not too many of them anyway for a small, landlocked country, but skills learned at work, such as those that go into making watches, carry huge dividends.

Switzerland, in fact, is ranked second on the most recent 'economic complexity' list, behind the traditional leader, Japan (Nick Routley, "These are the most complex economics [CE] around the globe," World Economic Forum, Newsletter, December 02, 2019). We already learn a lot: the top two countries are not the largest two economies, the United States and China, respectively, which are not even in the CE Top-ten (United States being ranked 12th, China 19th); and the top country, Japan, is actually a declining economic power, while Switzerland barged up the staircase. Indeed, the CE Top-ten is a list of surprises. After these two come South Korea, Germany, Singapore, the Czech Republic, Austria, Finland, Sweden, and Hungary, in that order.

Again, we note the small relative size of these economies (except, of course, Japan), and their European, Far-east and South-east anchors. Thailand and Malaysia also rank highly from these latter regions (25th and 28th, respectively), but minus Israel (18th) and Mexico (20th), European dominance is vivid. Here, we find the salient features to be a cognisant workforce trained either on-the-spot or within academic/technical institutions, with a social safety network (like social security, pensions, and the entire enchilada of governmental welfare supports), propping up the workforce. Crucially, the market is not the ultimate arbiter of economic decisions, but neither are those decisions too state-controlled. Competitiveness conjoins public sector provisions, itself implying disciplined fiscal policy, especially taxation.

It falls to reason Bangladesh's migration from a 'developing' into a 'developed' country must begin to harness some of these, particularly non-market features. First off, a low-wage exit must be in the framework, not necessitated instantly, but over a period of time. Many of our RMG factories have long-term contracts. They also profit from another factor of increasing importance: finesse of women workers, once eagerly sought in the RMG sector, is in high ICT (information and communications technologies) demand, though at a higher skill level. Women transiting into the ICT sector may be already underway across Bangladesh.

A second feature gets exposed: the shift from the RMG sector to a new production line, thus opening other doors, including those of product diversification. Bangladesh still differs from the other RMG 'graduates': instead of deliberately going out to diversify (recall how the clothing industry is invariably the first industrial initiative in so many countries: people need clothing before, for example, a laptop or automobile), Bangladesh has waited to run its string of low-waged competitiveness out before letting diversification knock on its door.

This carries the third feature (of so many, and not necessarily in the same order of discussions): training. It was not by chance that Bangladesh's educational institutions began to multiply from the 1990s when the RMG sector was already in high-gear. That the private sector had to be opened up for education also carried some inevitability with it. In a nutshell, though, particularly from the strings of technical and business schools, the skills sector has been mobilised. Its golden years lie ahead, since the ICT sector will draw upon more graduates from this background than any other, and certainly to RMG sector did.

A fourth feature could be the expansion and diversification of not only consumer demands, but also the huge volumes of those demands now that poverty is so unthinkably low. Here, too, the ICT influence can be found: only with the Internet age could consumer agenda, or shopping lists, expand as rapidly as it/they has/have. With the bottom-line being the expanded diversified market, domestic production cannot be far behind even if imports set the tone. Skills will spread as new product-lines appear in the firmament, as we are beginning to see with motor-bikes, automobile assembly, and ship-building. Here are the sinews of diversified growth.

'Productive knowledge' must also be backed by the establishment of some sort of a social safety network. Less so with issues like pensions in the private markets, Bangladesh does need to get into insurance in every nook and corner,  safeguards from bank failures, healthcare, and transitory supports, as in-between-job survival, for example. These, in turn, demand expanding the public coffers, a daunting proposition today when public spending to build megaprojects is stretching beyond routine limits, but clearly something to be anticipated in the near future to keep the 'developed' country transformation hopes alive among stock-brokers.

We have a couple of decades before the transition is expected to end. Evidently, there is no time to spare: as soon as the physical infrastructures get into place (finish the megaprojects), harnessing the social infrastructures must begin right away. This transition itself assumes the economy will continue roaring. Which takes us back to the starting point: the economy can only roar if the diversity plans fall into place, not just with exports, but also knowhow. Once in the 'economic complexity' listing, we will find the uncanny ways to climb that ladder, as we have done with global economic size. Signals get more positive than not.

Dr. Imtiaz A. Hussain is Dean (Acting), School of Liberal Arts and

Social Sciences (SLASS) and Head, Global Studies & Governance Program Independent University, Bangladesh

[email protected]

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